Pot Stocks Are Officially Dead!
Why You Should Forget About Pot Stocks
It’s been a tough year for pot stocks.
And if you follow the mainstream financial media, you’ll be led to believe that pot stocks are officially dead and that you should just forget about them altogether.
After all, those who bought pot stocks at the start of the year are likely down big time.
Certainly I am.
Of course, we have to put this in perspective.
After all, this year’s correction actually follows a very strong four-year bull run that delivered a handful of triple-digit and even quadruple-digit gains. I’m talking about gains such as...
- 1,174% on Aphria Inc. (TSX: APHA)
- 1,185% on OrganiGram Holdings Inc. (TSX: OGI)
- 3,015% on Canopy Growth Corporation (TSX: WEED)
So as you can imagine, I’m not losing too much sleep over this year’s sell-off. In fact, with all the bearish sentiment regarding pot stocks today, I’m gearing up to go on another bargain-hunting shopping spree. And you should, too.
Cash Is King
There are any number of reasons one can come up with for why pot stocks have taken it on the chin this year.
One reason is simply that early investors are cashing out — particularly those that had been sitting in lock-up purgatory.
Another reason is the reality that many of these companies simply don’t have solid outlooks because they’re not properly funded heading into 2020. Or management is simply spending money like drunken rappers on a photo shoot in the Bahamas.
What some of these bigger cannabis players have spent on worthless acquisitions has not only been absurd, but I would argue that it could be the basis for legal inquiry.
Regardless, there is a very real cash crunch weighing on cannabis companies that aren’t sufficiently funded. But this is actually a good thing. And the good folks over at Grizzle did an excellent job opining on this. Check it out:
Stock market capitulations like this are the forest fires of the capital markets.
These selloffs are extremely painful and absolutely devastating for current investors, but the corporate green shoots that are left behind will one day grow into large thriving companies.
Though this selloff certainly looks and feels like a four-alarm fire, sector valuations are finally reaching a palatable level.
If the market turns and investor sentiment recovers, these companies that screen cheap will raise the cash they need to stay in business and investors will be well rewarded.
I couldn’t have said it better myself.
And this is why it’s time to take some of the best advice ever given to us by the Oracle of Omaha, Warren Buffett:
Be fearful when others are greedy, and greedy when others are fearful.
Most investors are scared sh*tless of pot stocks right now. So clearly, it’s time to get greedy again.
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Cheap Pot Stocks — Going Fast!
While I’m a big fan of Uncle Warren’s wise words, you can’t go into this just buying a bunch of random pot stocks.
Instead, what you have to do is recognize two things:
- Why the cannabis market is still a good place to make a buck
- Which pot stocks are best positioned to make you a lot of money in 2020
Regarding the general overview of the cannabis market, it remains incredibly lucrative.
The bottom line is that the industry continues to grow and evolve at an incredibly rapid pace.
Today, 42 states in the U.S., plus the District of Columbia, have some kind of legalization in place, and there will be more after next year’s election.
Then there’s also the move to allow U.S. banks to get in on this action.
As I wrote a few weeks ago, the big banks are getting positioned to plow a massive amount of capital into the cannabis space after the eventual passage of the SAFE Banking Act, which will essentially allow the banks to take part in this industry, allowing it to move from a very inefficient “cash-only” system to one that is no different than any other industry that has access to banking services.
This is a huge deal, and it already passed the House. The Senate is next, and Trump has signaled that he will sign it.
You can read more about that, as well as some of the companies that are most likely to benefit from this, here.
Of course, the cannabis industry is bigger than just the U.S.
The entire country of Canada legalized last year, and next year our neighbors to the north will be able to buy and sell edibles, which opens up a whole new opportunity to increase revenues.
Down south, our good friends in Mexico are on the verge of completely legalizing cannabis. This actually may happen before the end of the year.
And in South America, Europe, Australia, and even Asia, billions of dollars are being ponied up by some of the richest people in the world, just to get an early piece of a relatively new industry that will be worth in excess of $130 billion in just nine years.
In 2018, it was worth about $12 billion.
This is a 26.9% CAGR.
Not too shabby!
Make no mistake: One bad year for pot stocks has no bearing on the profitability of this market over the long haul.
And this is why we’re taking full advantage of this year’s meltdown to pick up a handful of quality — and incredibly undervalued — pot stocks. Some of those stocks can be found by following this link.
You can also check out this report, which explains — in detail — why it’s never been a better time to load up on pot stocks.
Whatever you do, don’t sleep on this opportunity.
Next year, many of these beaten down pot stocks are going to be flying high again. And mark my words: There will NOT be another opportunity to buy them on the cheap.
To a new way of life and a new generation of wealth...
@JeffSiegel on Twitter
Jeff is the founder and managing editor of Green Chip Stocks, a private investment community that capitalizes on opportunities in alternative energy, organic food markets, legal cannabis, and socially responsible investing. He has been a featured guest on Fox, CNBC, and Bloomberg Asia, and is the author of the best-selling book, Investing in Renewable Energy: Making Money on Green Chip Stocks. For more on Jeff, go to his editor's page.
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